Life insurance, e.g., a life insurance policy, is a contract between an insurer and an insured subject, wherein the insurer agrees to pay a sum of money to a third party upon the occurrence of the insured subject's death. In return, the insured subject agrees to pay the insurance company a stipulated amount. The insurer may be an insurance company, and the insured subject may be an individual person. The third party may be referred to as a beneficiary, and may be an individual person. The sum of money paid by the insurer may be referred to as a death benefit, and may be paid as a lump sum or at particular intervals. The stipulated amount paid by the insured subject may be referred to as a premium, and may be paid at a particular interval or as a lump sum. A premium paid at a particular interval may remain constant, or may change, e.g., increase, over time.
A beneficiary who receives a death benefit in accordance with a life insurance policy may use the death benefit in a number of ways. For example, the beneficiary may choose to invest the death benefit in a number of investment vehicles, such as stocks, bonds, mutual funds, real estate, and/or commodities, among other investment vehicles.
A life insurance policy may have a cash surrender value associated therewith. A cash surrender value is the amount of money the insured subject receives from the insurer if the insured subject elects to terminate the policy before the insured subject dies. The cash surrender value of a life insurance policy may depend on the amount of the insured subject's premium payments, any crediting to the cash surrender value by the insurance company that may be in the form of interest, dividends, or other credits, and the costs of the policy, all of which may cause the cash surrender value to vary over time. For example, if an insured subject makes premium payments at a particular interval, and the premiums, together with any crediting to the policy, exceed the current costs of the policy, the cash surrender value of the life insurance policy may increase over time. A cash surrender value may be subject to taxation, and may be subject to charges by the insurance company, such as a surrender charge, for example.
A life insurance strategy which includes a life insurance policy may yield a long-term, future strategic value. Such a strategic value may be based on a complex, and often not express, relationship among mortality probabilities, product performance, and investment returns on reinvested death benefits, and may be subject to the uncertainties of mortality projections and economic markets. For example, because it is uncertain when an insured subject will die, the insured subject and/or beneficiary do not know whether, at any given point in the future, the amount of cash accessible from the strategy will be the cash surrender value, the death benefit value, or the death benefit value reinvested from the date of payment. Hence, a strategic value of a life insurance strategy can be difficult to predict.
A life insurance policy strategy having a cash surrender value associated therewith may be illustrated in ledger form, which can include the projected future cash surrender values and the death benefit value. However, the cash surrender values and death benefit value are expressed separately in the ledger, with no evaluation of the probability of which feature of the strategy is likely to represent an amount of the accessible cash at any future point in time. Hence, the ledger does not provide an indication of the strategic value of the strategy at a given future point in time.